A Homeowner's Guide to Refurbishment Grants and Tax Reductions in the UK
- Phase Zero
- Oct 7
- 4 min read
Updated: Oct 11
When refurbishing your home, taking advantage of grants, VAT (tax) reductions, and incentives can significantly reduce cost. These incentives often target energy efficiency, empty properties, or improvements for people with disabilities, among others. Below are the main schemes and tax-rules as of 2025-2026, with eligibility, how to apply, and pitfalls.
1. VAT Reductions & Zero-Rated Energy Saving Materials
VAT (Value Added Tax) rules are among the most important cost savers for refurbishment works.
Energy-saving materials (ESMs) installed in residential properties are (as of earlier 2022) zero-rated for VAT until 31 March 2027 under certain conditions; after that date the rate is planned to revert to 5%.
Qualifying materials include: insulation (walls, roofs, floors, ceilings, etc.), solar panels, air source or ground source heat pumps, water source heat pumps, controls for heating/hot water, draught stripping, and some other low carbon or energy saving equipment.
Reduced VAT rate (5%) applies to other goods/services related to energy measures or certain refurbishments if not zero-rated.
2. Reduced VAT on Empty Properties Renovation
If a residential property has been unoccupied (“empty”) for a period of time, there are VAT concessions:
If a dwelling has been empty for at least 2 years before work starts, and you employ VAT-registered contractors, then renovation or alteration works may be charged at 5% VAT instead of the standard 20%.
If property has been empty for 10 or more years, and after refurbishment is to be used as residential by you or family, you may qualify for zero-rated VAT under certain rules.
Evidence is required (e.g. council tax records, local authority confirmation) to prove the property has been empty.
3. Grant Schemes for Energy Efficiency & Heating
Several grants exist to help with the cost of upgrading homes for energy efficiency, low carbon heating, and insulation.
ECO4 (Energy Company Obligation, Phase 4): designed to help low income or vulnerable households to make energy efficiency improvements, such as loft insulation, cavity wall insulation, heating upgrades. Eligibility depends on EPC rating, whether you receive certain benefits, etc.
Boiler Upgrade Scheme: subsidy for switching to low-carbon heating (e.g. heat pumps, biomass boilers). Grants are available (e.g. ~£7,500 for heat pumps) in some schemes.
Great British Insulation Scheme: covers insulation works for eligible homes (often council tax bands, EPC ratings, etc.)
4. Other Grants & Local Council Support
Many local councils also offer grants for bringing empty properties back into use, or for improving inefficient homes. Work with your council to see what local schemes exist.
If your property has low EPC rating (D, E, F, G), or is off the gas grid, or you receive certain benefits — you are more likely to qualify.
5. Steps to Claim & Things to do Right
To make sure you get the maximum eligible relief:
Check eligibility early: Before you get quotes or start work, confirm which grants/VAT reductions apply to your situation. Mistakes can cost you.
Use VAT-registered contractors: For VAT reductions (empty property, energy-saving materials, etc.), contractor needs to be VAT registered.
Get proof of property status: For empty homes VAT relief, proof that property was empty for required period is often needed (e.g. council tax bill, empty homes officer letter).
Ensure materials & labour qualify: Not all goods or installations are eligible. Some items (e.g. carpets, furniture) are excluded.
Keep all invoices / documentation: You will need these for claims, audits, etc.
Check deadlines: Some VAT reductions or zero-rates are time-limited (e.g. the VAT zero-rate for energy saving materials ends 31 March 2027).
6. Caveats & What to Watch Out For
DIY vs contractor: If you do the work yourself, you generally cannot claim the VAT reductions (e.g. for empty homes). The work must be undertaken by VAT-registered contractors.
Scope of work: Only qualifying works are covered. Items like furniture, white goods, or decorative non-structural elements may not be.
Changing rules: Tax and grant legislation changes, especially regarding VAT zero-rating, grant eligibility. Always check the current date/rules on gov.uk or HMRC.
Installer obligations: Some schemes require approved or certified installers (MCS, TrustMark, etc.).
Local vs national differences: Scotland/Wales/Northern Ireland have sometimes different thresholds or additional schemes.
